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By Gabriella Kusz
Some have referred to cryptocurrency as the modern-day âWild Westâ due to its highly speculative nature, lack of regulation, and the fact that many people simply do not understand the landscape. However, recent months have seen many â both within and outside the crypto community â call for additional regulation, which would ideally provide a breeding ground to foster innovation and growth in the technology.
The history of regulation in the crypto industry
To date, the efforts to regulate the cryptocurrency industry to this point have unfortunately been largely ineffective â either because they attempt to over-regulate or under-regulate the emerging technology. While it is important to protect the rights, interests, and needs of consumers regarding emerging technologies, it is also necessary to not be so stringent as to limit the technologyâs development and discourage thinkers from innovating in the space. As such, the regulatory environment we find ourselves in is an uneasy middle ground â one in which we are afraid to neuter the technologyâs potential, but remain unsure of its potential consequences.
The crypto industry has also experienced greater uncertainty in recent months due to the controversy of wrongdoers like FTX, whose fraudulent activities and subsequent collapse caused the general public to lose much of its confidence in the crypto market. These events also led critics and lawmakers alike to call for greater regulation of the crypto market, hoping that increasing restrictions would also hold these entities accountable for their actions and protect the best interests of consumers.
However, on the other side of the debate are proponents of cryptocurrency who argue that regulation inherently counters the purpose of crypto: decentralization. The purpose of decentralization is to remove the power and control from centralized authorities and restore it to the people â effectively democratizing it â but those proponents argue that regulation puts the power back in the hands of a centralized regulatory body. Furthermore, critics argue that many people who make these laws do not understand cryptocurrency as much as they should to make laws about emerging technology.
Regulatory clarity in the crypto market
That being said, there is one thing that both proponents and opponents of cryptocurrency agree on: the need for additional legal and regulatory clarity about cryptocurrency. Even if the crypto market itself is not to be limited, there must be additional clarity as to how companies, lawmakers, and the general public should approach the emerging market. The current regulatory landscape is marked by uncertainty, as lawmakers debate how crypto should even be classified in terms of regulation. Should it be treated as a traditional security, or something else entirely due to its unique characteristics?
Even the major actors in the crypto market are beginning to push for regulatory clarity. For example, the Coinbase Administrative Procedure Act challenges the SEC to respond to Coinbaseâs petition asking for a formal regulatory framework in digital assets. The SEC is already required to respond to this position as part of its responsibilities; the lawsuit simply asks the regulatory board to share with the public their decision, which they should have long done in the first place.
One of the biggest mistakes a technological innovator can make â in any industry, much less blockchain tech and cryptocurrency â is looking at regulation as a âhoopâ to jump through. Although regulation is often designed first and foremost to protect the consumer, it is also vital in protecting the business entity itself. Clear regulations ensure businesses know how to operate legitimately and without fear of repercussions.
Why regulation must support clarity in crypto
Unfortunately, the crypto industry suffers from an exodus of sorts of US firms âoffshoring.â Still, perhaps surprisingly, these firms are not necessarily moving to jurisdictions with little to no legal and regulatory environments, but rather those with balanced environments designed to provide clarity to market participants. In other words, crypto movers and shakers are not looking for unrestricted free rein over the market, but a safer environment in which they know their expectations and obligations.
Some have argued that greater regulatory clarity is the way to combat this offshoring trend and retain US digital asset firms, while encouraging blockchain technology growth and broader innovation in the country. A fair and balanced regulatory framework would provide clarity and understanding to all involved parties â from entrepreneurs to investors and the general public â so that they can engage in the markets with comfort and confidence.
As more major players in the crypto industry, such as Coinbase, begin to challenge lawmakers to implement responsible legislation for the crypto market, we will see a space form conducive to growth, acceptance, and innovation. Regulation does not necessarily mean restriction â it means providing additional clarity to everyone, from investors to businesses, about the role they are expected to play in the crypto market. The result will be a landscape that is safer, friendlier, and easier to understand for everyone.
Author Bio
Gabriella Kusz, CEO â Global Digital Asset and Cryptocurrency Association
Disclaimer
The views and opinions expressed in this article are solely those of the authors and do not reflect the views of Bitcoin Insider. Every investment and trading move involves risk - this is especially true for cryptocurrencies given their volatility. We strongly advise our readers to conduct their own research when making a decision.